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Natural Gas Price Fundamental Daily Forecast – Traders Await Further Confirmation of Late October Cold Spell

Natural gas futures are inching lower early Tuesday after failing to follow-through to the upside overnight, following two days of higher gains. It’s probably too early to pass judgment on the price action, which is suggesting investor indication and impending volatility.

The market could also be going through a transition period after last week’s steep sell-off as weather models show colder temperatures arriving in late October. Buyers are being a little tentative, however, because they aren’t sure if the weather pattern is indicating a “cold snap” or something more pronounced.

The catalysts underpinning the market are stronger spot market prices amid forecasts pointing to cooler temperatures in store for the Great Lakes and Northeast later this week.

Additionally, guidance from both the American and European models reflected a colder pattern in the 11-to-15 day period, according to Bespoke Weather Services.

At 11:47 GMT, December natural gas is trading $2.504, up $0.006 or +0.24%.

Short-Term Weather Outlook

According to NatGasWeather for October 15-21, “A strong cool shot will sweep across the Midwest the next few days after tracking out of the Rockies and Plains with lows of 20s and 30s. Texas and the southern US will be mostly comfortable with highs of upper 60s to lower 80s, although locally hotter over the Southwest, South Texas & Florida. The West will see a mix of weather systems and warm breaks, coolest Northwest with 50s and 60s, while hottest over California and the Southwest with 70s to near 90 Fahrenheit. Overall, stronger demand this week compared to last week due to cooling across the North.”

Mid-Term Weather Outlook

Bespoke chief meteorologist Brian Lovern said, “…models appear to be bringing a wave of tropical forcing out toward the central Pacific, allowing a warmer ridge to develop in the West, sending a colder trough into the eastern half of the nation. The bulk of the forcing hands back over the Indian Ocean, however, and without blocking in place, it is possible that this colder push is simply another transient one.”

Daily Forecast

The shift in the weather pattern has been just enough so far to chase out a few of the weaker shorts. The stronger short-sellers want to see stronger evidence of a prolonged cold spell.

“Even with the colder trends over the weekend, gas-weighted degree day totals over the next 15 days are still on track to fall below normal,” Bespoke said.

“We respect the model output but want to see more in order to be convinced that this is a fundamental shift in base state toward higher than normal demand, as opposed to just another window of variability,” Bespoke chief meteorologist Brian Lovern said.

The daily chart indicates the direction of the market on Tuesday will likely be determined by trader reaction to a minor 50% level at $2.278. Holding above it will indicate the short-covering is getting stronger.

This article was originally posted on FX Empire

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